Marathon Oil sells Irish subsidiary to Vermilion

2009-06-24 20:30:03 -

HOUSTON (AP) - Marathon Oil Corp. on Wednesday said it reached an agreement to sell a subsidiary with an interest in a gas development off the coast of Ireland for up to $400 million.
The oil and gas company will sell its wholly owned Marathon International Petroleum Hibernia Ltd. unit to Vermilion Energy Trust. The unit has an 18.5 percent interest in the Corrib natural gas development off County Mayo on Ireland's Northwest coast.
The final sale proceeds will range between $235 million and $400 million, depending on the timing of the first commercial gas at Corrib.
Marathon said an initial payment of $100 million will be made at closing, expected sometime before December. The remaining balance will be due at the time of the first commercial gas, which is expected between late 2010 and late 2011.
As part of the deal, Vermilion will invest up to $300 million to complete the facilities needed to reach the gas.
Marathon's total net proved reserves associated with the Corrib development at the end of 2008 were 98 billion cubic feet of natural gas (16.4 million barrels of oil equivalent). Shell Oil operates the project, and holds a 45 percent interest. Statoil Hydro holds a 36.5 percent working interest.
As a result of this deal Marathon said it will record an after-tax loss, currently estimated at $150 million, in the second quarter. The total could be adjusted in future periods, depending on the amount of the total proceeds.